Local Economic Development in the Practice of the European Union

On either a European or a local scale the consideration of the technical policies of the European Union and its institutions is indispensable. In the EU there is neither a uniform concept of local economic development nor a unified framework of the activities purposefully directed at it. Several institutions and technical policies, however, can be related to local economic development or certain elements of it. As regards business development, the development of small and medium-sized businesses (KKVs), with the aim of the exploitation of local, regional potentials and extension of employment appears at the Vállalkozási Főosztályon (major department of businesses).As regards employment, certain activities that concern individual partial areas of local economic development are also linked to the implementation of the Lisbon Strategy and the management of the economic crisis. In the development policy of the EU for third world countries the development of the economy and its assistance at the local level are also crucial areas.

From the point of view of regional development the Directorate General of Regional Policy is of a high importance. One of the declared objectives of the regional (and cohesion) policy is the decrease of differences in the development of the regions and the closing up of

disadvantaged regions. At the expense of the resources of both the European Development Fund (ERFA) and the European Social Fund (ESZA) there are economic developmental objectives or opportunities – or ones forming the foundations for them – in the operative programmes to be realised in the framework of national development plans. The objective of these is not definitely the development of the local economy but the grants received make it possible to also realise such objectives. The rural development measures of the European Agricultural and Rural Development Fund (EMVA) also assist local projects of economic development.

Out of the tools for support policy of the EU there are two programmes that can be highlighted from the point of view of economic development: LEADER, which grew out of the community initiative of the EU, directed at rural development including economic development and which is of micro- or small region magnitude and URBACT, establishe after the community initiative URBAN, which is dedicated to enhance the integrated and sustainable experience and knowledge exchange of towns and cities and urban regions. Both initiatives are built on western-European regions and the challenges characteristic there and also became available to the new member states after the enlargement of the EU.

Unfortunately the two EU programmes mentioned “carve into stone” the segregation that is seen at both at a European and domestic levels in relation to the development of urban and rural areas. The reinforcement of the links between cities and rural areas, as an objective of development policy, is present in either programme but financing and the separation of the actions operate against the unified treatment of rural and city regions. Even so, the experiences can be used in our country. Considering local conditions a number of good practices can be adapted or at least can serve to inspire ideas (Ricz, 2010).

The practice of LEADER

LEADER finances a number of rural economic developmental programmes within the framework of local rural development strategies and under the coordination of local rural developmental action groups the experiences of which can serve as examples and established practices for other regions as well. The approach of LEADER is built on seven basic criteria: regional approach, building from bottom up, partnership (local action team), innovative solutions, integrated approach, network construction and the cooperation between regions and local financing and management. LEADER supports local developments of micro-regional magnitudes and among them a number of local economic developments are also to be found.

The practice of URBACT

There is no opportunity to realise particular local economic development actions within the URBACT programme. It can only be used for the distribution of the experiences of projects already implemented or for the joint development of local development strategies. The programme has a considerable volume of added value in regard that though setting up local support team it creates a tradition by working out local action plans and city development strategies in towns and cities, conurbations and parts of settlements, too.

Competitions for business development

There are also EU other programmes related to certain partial areas of local economic development, such as the programmes JESSUCA set up for the financing of sustainable urban developments and JEREMIE ensuring micro- credit constructions for micro-, small- and medium sized businesses.

Finally, among the statements summarising the theory and practice of local economic development it has to be emphasised that its greatest is not primarily the securing and enhancing of economic development but the realisation of a “receptive”, “divided” and

“residual” development that can reach the volatile and excluded groups of society, the poor and the poorest layers. By securing fair employment opportunities its further objective is to guarantee a decent quality of life locally (in harmony with the environment) for the local community, which at the same time does not jeopardise meeting the needs of the future generation either. it takes into account the broad – economic, social, economic and regional – dimensions of sustainable development and realises an economic development that matches and fits local properties. So, this model of economic development focuses on the creation of the local pillars of the economy above all. It wishes to develop the local economy in a direction that ensures it can be linked to the economic activities and agents of a broader environment and so builds on external relations primarily (Ricz, 2010).

6.5. Contact Points between the Local Economic Development in the Regional Operative Programmes of National Development Plans

The concepts for local economic development have been continuously present in the most important documents of regional development and as it has been mentioned several times before in the law on Local Authorities and the National regional development concept (1998), which is based on it. The perfection of the European integration processes and especially the accession of Hungary in 2004 made the problems of local economic development a direct part of the regional policy of the European Union. As it is known, the precondition of joining the European Union was the submission of the regional, i.e., national development plan and the European horizon has opened up since this date even from the point of view of local economic development. Two more important national development projects are worth mentioning together with the regional operative projects included in them, the Nemzeti Fejlesztési Terv (national development plan) (NFT I.), prepared for the partial fiscal period following the accession and the Új Magyarország Fejlesztési Tervet (New Hungary development plan) (2007–2013), which is valid at this moment too and for the sake of simplicity is often called NFT II even in professional circles.

The development and submission of national development plans is an important step for Hungary to be able to get a share of the financial grants, primarily of the Structural funds and the Cohesion Fund which expressly aim to equalise the differences in development between the member states and certain regions of them. The national development plans, which also contain regional operative programmes, are one of the most important and most efficient tools for every member state and also for Hungary to acquaint the European Union with its long-term strategy and make it accept the strategy.

The first National Development Plan (2004-2006) indicated the improvement of the quality of life as a long-term objective, which was to be realised by moderating the differences in the incomes, which were well behind the average in the European Union. In the interest of realising the broad objective the development document defined four specific objectives:

1. Improving the competitiveness of the economy, which aimed to improve the competitiveness of the production sectors;

2. The better utilisation of human resources by increasing employment and developing human resources;

3. Higher quality environment, improved infrastructure for the achievement of which the development of infrastructure and cleaner environment are necessary;

4. A more balanced regional development, which was to be achieved by using the potential natural, economic and human capacities of the regions.

The four specific objectives were embodied in further five operative programmes (table, 6.5):

 Gazdasági Versenyképesség Operatív Program (economic competitiveness operative programme) (GVOP),

 Agrár és Vidékfejlesztési Operatív Program (agricultural and rural development operative programme) (AVOP),

 Humánerőforrás Fejlesztés Operatív Program (human resources operative programme) (HEFOP),

 Környezetvédelem és Infrastruktúra Fejlesztés Operatív Program (environmental protection and infrastructure development operative programme) (KIOP),

 Regionális Fejlesztés Operatív Program (regional development operative programme) (ROP).

The regional Development Programme of NFT I helped to moderate the differences in the development between the regions by exploiting the internal resources of the regions in a sustainable way while the sectorial operative programmes considered the implementation of particular topic areas as their primary objectives. Between 2004 and 2006 the Managing Authority managed three priorities worth a total of HUF 476.21 billion: 1. the enhancement of tourism potentials in the regions; 2. the development of regional infrastructure and settlement environment; 3. the strengthening of the regional dimension of human resource development.

One of the important methodological breakthroughs of the NFT I development cycle was that the measurement of the implementation of the programmes became unified. All the projects within NFT I, and so ROP as well, had their indicator systems and, the data of which were collected by using a unified monitoring system (EMIR). The project level indicator of ROP was met and at least 75 % of the resources that could be used went to the four less developed regions (Észak-alföld, Észak-magyarország, Dél-alföld, Dél-dunántúl).The resources available were fully used and the amount of the justified public expenditures exceeded the planned total costs of HUF 476.21 billion at the level of the operative programme by 4.4 %.

6.5. ábra: Az uniós támogatások megoszlása az operatív programok között, százalé

Forrás: Horváth–Szaló, 2003.

All in all, as regards the experiences from the National Development Plan for 2004-2006 (NFT I), it has to be made clear that it was not a comprehensive development plan embracing all the sectors but a unified strategy that seized the directions of utilisation of European Union development resources becoming available for Hungary. The three specific objectives of the plan are: the improvement of economic competitiveness, the development of human resources and the development of a higher quality environment, to which the attainment of a more balanced regional development was added. Accordingly, for the development of the infrastructure and environment we received twice as much in grants over the period 2004-2006 as for economic and human resource development. A total of over Euro 3000 million was paid out.

A further experience in connection with the NFT I is that the primary step is the definition of socio-economic environmental objectives that are comprehensive and valid for the whole of the country and sectorial planning can only follow afterwards. At the beginning, the quality of the project proposals and the complexity of the tender calls together led to a high number of formally wrong proposals. The systems of requirements of the different ministries were also rather heterogeneous and the expectations of certain managing authorities also differed from one another. After having realised this, the government made serious steps towards establishing an “applicant-friendly” tendering system. The willingness to submit project proposals was high and until November 2006, 38920 project proposals arrived for a grant amount of HUF 1517 billion (NFH – EMIR). Out of this number 17000 proposals were found to be eligible and were awarded HUF 694 billion (Káposzta ed., 2010).

Considering the different pieces of professional criticism Hungary submitted the new National Development Plan (NFT II) for the new programme period (2007-2013), which was named Új Magyarország Fejlesztési Terv (New Hungary Development Plan) (ÚMFT) (figure 6.6). Within the cohesion policy of the EU Hungary is eligible for further development resources between 2007 and 2013, which is complemented by domestic co-financing and private capital. From the chapter on cohesion policy of the budget of the European Union we have Euro 22.4 billion at our disposal for the period 2007-2013. This is complemented by the state contribution of Hungary, which makes up 15% of the total budget that can be used and so a total of Euro 26.2 billion can be spent on developments. Calculating with the exchange rate of HUF 265 forecast by the Ministry of Finance means a total of HUF 6943 billion between 2007 and 2013. This is complemented with about HUF 1200 billion by the European Agricultural and Rural Development Fund and the European Fisheries Fund. These funds are also complemented with expenditures from organisations implementing the developments (businesses, local authorities, non-profit organisations), which can be regarded as own resources, and so development larger than this budget can be realised (UMFT, 2007).

Figure 6.6: The relationships between the elements of the National Development Plan Source: Dózsa, 2007, cited by: Káposzta ed., 2010.

In order to be able to call the money available a plan had to be made for the European Union – this is the New Hungary development Plan – which contains the detailed particular objectives, strategies, centres of interest, priorities and concrete proposals for measure for which project proposals may be submitted to the authorities concerned. The developmental efforts are concentrated in six areas to reach the objectives laid down. In order to realise these objectives, which had been set on the basis of thematic and regional divisions, operative programmes were devised (Káposzta, ed., 2010).

In the six areas the following operative programmes were marked, which are indicated in the following structure:

 The development of the economy (Economic development OP).

 The development of transport (Transport infrastructure development OP).

 The renewal of society (Social renewal OP, Social infrastructure OP).

 Environment and energy development (Environment and energy development OP).

 Regional development (the operative programmes of the seven NUT 2 regions in Hungary, and the operative programmes of European Regional Cooperation).

 State reform (The renewal of public administration OP, Electronic public administration OP).

Operative programmes under objectives 1, 2, 3, 4 and 5 can be applied for by any eligible entity irrespective of their regional seat within the country but as regards operative programmes under Regional development, number five, only entities working or living or whose developments are realised are in the given region, are eligible. Regional operative programmes related to regional development vary according to the needs or possibilities of the regions. The main strategic policies are as follows:

 Southern-Great Plain: knowledge industry, agriculture, tourism, (in Szeged: ‘Biopolis’ – health industry, environmental-industrial, agro-economic bio-technology),

 Southern-Transdanubia: high quality model region (in Pécs: “the pole of life quality” – cultural and environmental industries),

 Northern Great Plain: the quality life-, health- and recreational centre of the region (in Debrecen: “the industrialisation of science” – pharmaceutical industry, agricultural innovation),

 Northern Hungary: industrial development, services, tourism, (in Miskolc: “Technopolis” – nano-technology, chemical industry, mechatronics, renewable alternative energy sources),

 Central-Transdanubia: innovation-oriented economic development based on small- and medium sized businesses (in Székesfehérvár and Veszprém: logistics, nano- and bio-technology, technical informatics),

 Western-Transdanubia: the development of the north-south Pannonia economic axle (in Győr:

“Autopolis” – car industry, machine production, renewable energy sources),

 Central-Hungary: the main objective is to enhance the competitiveness and attraction of the region (Budapest has no distinct, individual strategy).

All in all we can say that NFT I and NFT II offer broad opportunities for the regional initiatives, innovative solutions they represent and their systems-like implementation. Either great national development programme concerns the ideas included in the Országos Területfejlesztési Koncepció (National Regional Development Concept) and as regards local economic development programmes, among others the breakthrough points, development ideas for local development (2005) that rely on local development breakthrough points,

development ideas that are more strongly based on environmental and cultural values in closing up external and internal peripheries. This largely depends on the efficiency and success of the local initiatives founded on the principle off subsidiarity.

6.6. The Regional Development Operative programme of the Northern Great Plain